AJ Gill
Canada’s federal, provincial, and territorial (FPT) ministers of agriculture recently agreed to remove the reference margin limit (RML) for AgriStability, one of the business risk management (BRM) programs under the Canadian Agricultural Partnership. The removal of the RML will be made retroactive to the 2020 program year. The objectives in making this change are to help simplify the program and help farmers in need by increasing the level of support for agricultural operations that are highly mechanized or use family labour causing lower allowable expenses.
BC Ministry of Agriculture led the way for this change. The British Columbia AgriStability Enhancement program that was introduced in 2019 also included the elimination of the RML.
How do these changes benefit you and your farm?
Producers and sectors which had low AgriStability eligible costs and corresponding limited reference margins, will now benefit from higher reference margins and better coverage.
The most important thing to understand is that RML increased the margin drop required to trigger benefits substantially when we relate it back to the original reference margin. Specifically, farms for which RML applied required a 30 to 51% drop, depending on degree of limiting, relative to their original reference margin to trigger AgriStability benefits. That is what made the program so much less responsive when RML applied.
Under RML, many farms had required a 30-51% margin drop to trigger benefits. With its removal, ALL farms now require only a 30% margin drop to trigger benefits.
Revenue Drop Required to Trigger Agristability
AgriStability program changes FAQ
Q: Doesn’t AgriStability require a 30% revenue drop for any farm to trigger benefits?
A: No, the 30% drop advertised by the AgriStability Program is a drop relative to your reference margin. The revenue drop required varies depending on the type of farm and cost structure. Revenue drop percentages are labelled along the line graph with very low revenue drops in the bottom right hand corner and higher revenue drops on the left-hand side of the graph.
Q: Where would different types of farms fit on this graph and what kind of revenue drops would they require to trigger AgriStability benefits?
A: Farms with a high cost structure (Industry Sectors Group 1) fit on the bottom right hand side and require a revenue drop of 1.5% - 12% to trigger AgriStability benefits. Moving left on the graph, farms with a moderate cost structure (Industry Sectors Group 2) require an estimated 12% - 19.5% revenue drop, and those with a low-cost structure (Industry Sectors Group 3) require an estimated 19.5% - 25.5% revenue drop.
Q: What difference does knowing the revenue drop required to trigger AgriStability benefits make for me?
A: It is critical that you know and understand what level of revenue drop is required, as well as what risks might contribute to a revenue drop for your operation to make a proper decision on AgriStability participation.
Q: What difference did removal of the RML have on the revenue drops required to trigger AgriStability benefits?
A: The orange line (labelled RML) on the graph, when compared to the white line (labelled No RML), shows the potential impact that RML had on revenue drop trigger points for certain farms in Group 2 and Group 3. Certain farms in these sectors will benefits from substantially lower revenue drop trigger points now that RML has been removed.
Q: How would I go about figuring out the eligible expense to eligible revenue ratio to determine where my farming operation would fit on this graph?
A: Eligible revenue and eligible expense are both defined by AgriStability program rules. Ideally, you would have to know the average eligible revenue and eligible expense from the three years used to calculate your Olympic Average reference margin for AgriStability. These amounts can be estimated using the most recent AgriStability Calculation of Program Benefits (COB) notices and / or accrued financial statements. Estimation of AgriStability reference margins, particularly if you have not participated in AgriStability recently or if you do not have up to date COBs can be difficult for a number of reasons. We would recommend the estimates not be undertaken without the assistance of an advisor that is proficient in AgriStability policy and procedures.
Next steps
AJ Gill is the Regional Leader for Agriculture Risk Management Resources with MNP. Contact AJ to enroll if you have either previously opted out of or never participated in the AgriStability Program. The 2021 AgriStability Enrolment Deadline has been extended from April 30 to June 30, 2021, and enrollment has been simplified for returning participants, who now you have a choice to base coverage on the past three years or a five-year average. AJ can help you to determine the option that gives you the highest coverage.
Contact AJ at 250-469-6488 or aj.gill@mnp.ca or visit MNP.ca/ARMR to watch a short video further explaining the AgriStability changes.
